Who is Clinuvel Ltd?
Clinuvel Ltd (ASX: CUV), founded in 1987, is a leading biopharmaceutical Australian company. CUV specialises in delivering treatments for severe skin disorders. Clinuvel’s primary drug, SCENESSE, protects patients, whose light-sensitive skin cannot tolerate UV radiation. Patients who suffer from Erythropoietic Protoporphyria (EPP) live reclused isolated life. However, once patients receive SCENESSE their skin pain is eliminated, and ‘life takes its place’.
Why did CUV rise by 150% in 2019 Jan 1 – October 9
Key price sensitive event 1: Clinuvel releases Phase II clinical trial results – 19th December 2018
CUV’s clinical trials in Singapore, demonstrated how patients receiving SCENESSE maintained their pigmentation and increased their tolerance of UVB light without causing negative side effects. CUV’s successful trials resulted in the company’s Asian presence to skyrocket. Primarily, because darker-skinned patients suffered severe pigmentation damage from the existing standard of care. In turn, investors added CUV to their watchlists as they understood the efficacy, market opportunity, and share growth potential behind SCENESSE. Thus, the sensational trial results kickstarted CUV’s share price growth for 2019.
Key price sensitive event 2: Clinuvel declares dividend – 28th August 2019
CUV issued a second consecutive dividend, 25% higher than 2018, on the 28th August. Clinuvels dividend distribution highlights not only their gratitude to investors but also CUV’s growth in profitability. Investors reacted to CUV’s dividend with excitement as the share price rose even further.
Key price sensitive event 3: Clinuvel presents safety and effectiveness data – 10th September 2019
CUV, further added to their arsenal of clinical data when they reported to the International Congress on Porphyrins and Porphyrias (ICCP) in Milan (Italy). The presentation of SCENESSE’s long term safety and effectiveness capitulated Clinuvels medical profile within Europe.
Key price sensitive event 4: FDA approval for SCENESSE – 9th October 2019
The FDA gave the green light for Clinuvel to deliver SCENESSE to the US market. It must be understood that the FDA rejected CUV three times before the recent approval. Thus, illustrating the relentless focus of CUV to transform a regulatory nightmare into their best milestone since IPO. FDA approval allows CUV to improve its profitability growth through the US market.
Also, the regulatory endorsements from the FDA and European Medicines Agency (EMA) further validates the international effectiveness of SCENESSE. In turn, investors reacted positively as the share price hit an all-time high of $45.
First, let’s consider profitability. CUV has been profitable for the last three years. Moreover, CUV widened its profit margin by 37% over the past year (June 2018 13.22 million – June 2019 18.13 million). In turn, profitability reduces the risk for investors.
Clinuvel’s ROE is 32%. CUV’s ROE is higher than the industry average of 11.9%. Indicating CUV’s solid financial position. Moreover, Clinuvel is debt-free, illustrating that the business achieved an impressive ROE without acquiring debt.
Lastly, CUV reported an increase in cash and cash equivalents by $4,067,000 million in September , totalling $58,336,000 million.
Despite what might seem a fairy tale story the negatives (risks) must be considered. Why? Because YIG believes in providing a balanced perspective, so investors are not lured into companies with an uninformed view.
An interesting point is the volatility in CUV’s share price over the last 3 months. CUV shares decreased from $45 (8th October) to $29.04 (20th December). The 35% decrease may cause investor apprehension.
However, the 35% decrease represents short term investors cashing in. Achieving FDA approval is a significant milestone for a biotech and a difficult achievement to top. Short investors saw FDA approval as an opportunity to make a good return. Thus, the volatility does not indicate a fundamental negative in the business.
Should Investors watch CUV for 2020?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
With an impressive bank of clinical data, an attractive balance sheet and recent FDA approval it is safe to say CUV delivered excellent results in 2019. CUV is not risking the success of their company on the one drug SCENESSE. Instead CUV is developing a product pipeline that will adapt to the changing consumer landscape. Thus, despite the worries of a recession CUV is one to add to your watchlist at the very minimum. An investment by an individual should involve extensive research as we are only commentating on stocks we have researched. We aim to teach YIG viewers to conduct research across many sources as we are not brokers and are not liable for financial losses.
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If you want to broaden your knowledge on the BioPharmecutical/Biotech market then read our extensive analysis on Paradigm Bio Pharmecuticals (PAR), Novita Healthcare Ltd (NHL), Imugene Ltd (IMU) and Opetha Ltd (OPT).
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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
Written by Associate of YIG, Patrick McLoughlin